July 6, 2009

Short term success is not a strategy

In today business environment, executives are nervous. Sales are plummeting, prospects are uncertain and deals get delayed. Regardless of the unpredictable nature of the business cycle, shareholders, investors and owners make the management team accountable for any slowdown in business. The executives are under enormous pressure to deliver quarter after quarter and some of the pressure is often relayed to the product team.

Don’t succumb to external pressure

However despite external pressures, short term focus is not a business strategy. Good product managers know that valuable and successful products don’t get built in one day; it takes time. A few setbacks or bad quarters along the way are immaterial as long as the product is getting closer to the final vision.

Microsoft is the archetype for long term strategy and planning. When entering new markets they willingly accept to be simple contenders and recognize that short term opportunities are poor. However as long as their strategy is solid and the opportunity real, they will keep investing. They have been very successful with this approach during their corporate history. It all started with Windows.

A short history of Windows
Originally, Microsoft announced Windows in 1983 but the development was delayed multiple times. When Windows 1.0 was finally released in 1985, the industry was laughing. The product was poorly designed as a pure extension of MS-DOS and particularly. Even if some of the underlying concepts had a lot of merits nobody seemed to notice – running multiple applications concurrently and use a mouse device to control the interface.

2 years later, Windows 2.0 was launched and added some innovations that are now common in modern OS: windows overlay and resizing, keyboard shortcuts for navigation, etc… But adoption was still poor. Finally in 1990, 7 years after the first announcement for Windows, Microsoft revealed Windows 3.0 … and the industry stopped laughing. The product was a complete overhaul of the previous versions, with advanced graphics and better usability. The product proved a huge commercial success with 10 millions licenses sold and established one of the most dominant franchises in the computers history.

Obviously Microsoft did not pick the easiest road and most companies could not have afforded to throw money for so long to unsuccessful projects. However you have to admire the conviction and discipline of Bill Gates who kept investing for 7 years in his long term vision despite so many setbacks.

Long term strategy is not a luxury

Some will argue that short-term results have become a matter of survival for many companies and long term planning is a luxury they can’t afford. However this reasoning is flawed. If a company is so ill, this is typically because a lot of bad decisions were made. Why bad decisions were made? Because management was only focused on short term prospects and gains not on long term strategy. If you are already in a hole, you need to stop digging. For example the big box electronics retailer Circuit City filed for bankruptcy protection in November 2008. One year before the company was already in a lot of trouble and a long term strategy to compete against Best Buy and Walmart was badly needed. Despite those obvious problems, management decided instead to focus on short term issues and laid off 3400 of its most highly paid and experienced employees. This certainly offered a short term relieve to their finance but eventually backfired and only accelerated their demise.

Keep your end goal in mind

The same than when running a marathon, you don’t plan your race as a succession of sprints, a product strategy should be focusing on long term vision and commitment. This is the duty of product managers to maintain a steady direction for the product and avoid getting distracted by short term opportunities and issues.